Banks in Poland granted almost 8.1 billion zloty (€1.8 billion) of mortgages in July, the highest ever monthly figure, as interest rates hover at all-time lows and inflation continues to accelerate.
The number of housing loans was up by 45% and their value increased by 70% compared with last July. According to Poland’s Credit Information Bureau (BIK), in 2021 as a whole mortgage sales will increase by 30% year-on-year to a record 82 billion zloty (€18 billion).
While the slump in house buying during the pandemic was to be anticipated, last month’s value was also 31% higher than two years ago, notes the Rzeczpospolita daily. Sales have been steadily increasing this year and the monthly value of mortgages has been at over 7 billion zloty for five months now.
The newspaper explains the growing demand for mortgages as the result of “loose” bank credit policy and all-time-low borrowing costs, which make it easier for borrowers to fulfil creditworthiness requirements – a tendency also confirmed by earlier reports this year.
As inflation accelerates – hitting 5% year-on-year in July, the joint-highest figure in two decades – Poles have also been looking for ways to protect the value of their savings. The near-zero interest rates have caused people to turn to real estate instead of traditional saving accounts in banks.
Long-term loans such as mortgages, however, run the risk of accruing higher interest payments in the future. The average interest on loans is now 2.8%, compared with 4.5% five years ago, reports Rzeczpospolita.
While Poland’s central bank has kept its key interest rate unchanged at 0.1% since last May, as prospects for the economy improve there will be more pressure to increase rates to rein in inflation. This would likely result in an increase in repayment costs for borrowers.
“Since interest rates have not been raised for a long time, it should be taken into account that this may eventually happen, and the cost of the debt will increase,” said Piotr Wachowiak, rector of the Warsaw School of Economics (SGH), quoted by Business Insider Polska.
Mortgage applications have been consistently high in the past months in Poland, oscillating around 50,000 per month, compared with around 37,000 per month in 2019, according to data from BIK cited by Rzeczpospolita.
In May, Bartosz Turek, chief analyst at HRE Investments, attributed the change to greater market optimism and businesses rebounding after months of lockdown. “A huge group of Poles who recently put off aspirations for their own real estate are now deciding to buy,” he said.
Moreover, financial institutions with excess money from deposits are keen to offer loans to make use of idle capital – with a preference for mortgages, which involve large sums and usually carry less risk of default.
Main image credit: Wiktor Karkocha/Unsplash
Maria Wilczek is deputy editor of Notes from Poland. She is a regular writer for The Times, The Economist and Al Jazeera English, and has also featured in Foreign Policy, Politico Europe, The Spectator and Gazeta Wyborcza.
